How to Use Qualified Charitable Distributions Like a Tax Pro

Cut taxes and give back with qualified charitable distributions.

Cut taxes and give back with qualified charitable distributions. ElenaR/Shutterstock

When you donate to charity, you’re making a difference in someone else’s life—no matter how big or small. In fact, charitable giving can be a key component in any financial plan.

And it also can open the door to key tax benefits.

This is especially important to retirees, whose lifetime savings may be significantly reduced by taxation when they need it most.

One way retirees can engage in charitable giving and effective tax management is by making a qualified charitable distribution (QCD).

What Is a Qualified Charitable Distribution?

A qualified charitable distribution allows those aged 70 1/2 and older to donate up to $111,000 in 2026 to a qualified charity directly from a traditional individual retirement account (IRA).

The distribution itself won’t count toward your taxable income.

But one of the most important highlights of a QCD is that it can replace your required minimum distribution (RMD) for the year in which it was made.

RMDs are withdrawals you must make from your traditional IRA beginning when you turn 73, regardless if you need the money or not. And RMDs would add to your taxable income.

By the time you reach RMD age, you’d likely have a sizable IRA nest egg. And because RMDs are calculated partly based on your account balance, RMDs can be very large. They can be large enough to bump you into a higher tax bracket.

And because RMDs increase your taxable income, they can trigger a phase-out of key tax deductions. They can even increase taxes on your Social Security benefits. Moreover, RMDs can trigger the income-related monthly adjustment amount, a surcharge on premiums for Medicare Part B and Part D.

But you could steer clear of all this by replacing your RMD with a QCD.

For example, say your RMD for the year is $111,000. You can make a QCD to a qualified charity to satisfy this RMD requirement. As a result, the distribution won’t add to your taxable income and your RMD obligation would be satisfied for the year.

Plus, making QCDs effectively reduces the balance of your traditional IRA. As a result, it could also reduce the size of RMDs in the future.

Furthermore, QCDs don’t count toward the maximum amounts that can be deducted based on charitable giving for those who itemize their tax deductions.

The maximum value of charitable donations that can be deducted from your tax return generally ranges from 20 percent to 60 percent of your adjusted gross income. These limits don’t apply to QCDs. Therefore, you may be able to make much larger donations via a QCD than you would donating cash or appreciated assets directly to charity.

Avoid Benefits From the Charity

In order to make the most out of your QCD, you should deny any benefits you may receive from the charity to which you’re providing your donation.

In these situations, the QCD may become invalidated and you’d need to reduce any itemized charitable deduction.

For example, let’s say you donated $1,000 to your college in what could count as a QCD. But the college in return provides you with a $200 discount on football game tickets for the season.

Because you received a benefit from the charity, the entire $1,000 is disqualified as a QCD and it becomes subject to income taxes as a regular distribution would be.

But you’re allowed an $800 itemized deduction ($1,000 - $200).

This scenario involves the concept of disallowance. And while it may be clear here, it may not be as clear when it comes to state tax credits.

First-Dollars-Out Rule

Under current Internal Revenue Service rules, the first dollars that are withdrawn from a traditional IRA in a year when the taxpayer owes an RMD would go toward satisfying the RMD for that year.

To give you a better picture, here’s an example. Say your RMD this year is $10,000, and you withdrew $5,000 to cover a medical emergency. Later in the year, you decide to make a QCD of $10,000. Because the initial $5,000 withdrawal already covered part of this year’s RMD, only $5,000 of the QCD would count toward the remaining RMD.

What Else Should You Know About QCDs

Generally speaking, you must reduce your QCD by the amount of deductible IRA contributions you made in the year you turn 70 1/2 or later. So if you made tax-deductible IRA contributions during a year you intend to make a QCD, you should approach this with the guidance of a qualified tax adviser.

And if you’re sending a QCD check to charity from your IRA provider, the charity must cash the check before the end of the year in order for the QCD to count toward your RMD. This is why it’s important to consider making QCDs earlier in the year and no later than early December.

Because a QCD allows you to benefit from a tax-free IRA distribution, a QCD won’t count as an itemized charitable deduction. But as long as you meet the basic requirements like age, you can make a QCD whether you’re itemizing deductions or taking the standard deduction.

The $111,000 QCD limit applies for the year of 2026. So you can make one large QCD or several small ones throughout the year as long as you stay within those limits.

The limit applies to the total QCDs made from all eligible IRAs. These eligible IRAs also include inherited IRAs, as well as inactive SEP and inactive SIMPLE IRAs. (A SEP is a simple employment pension, and a SIMPLE IRA is a savings incentive match plan for employees.) “Inactive,” in this case, means that these SEP and SIMPLE IRAs are no longer receiving employer contributions.

How to Make a QCD

In order to make a QCD the right way, you need to send the funds directly from your IRA to a charity qualified under Internal Revenue Code §170(b)(1)(A). And for a QCD to be able to replace your RMD, you must make that QCD by the same deadline as a regular distribution, which is typically Dec. 31 of the applicable tax year.

Some IRA providers can make electronic transfers directly from your IRA account to your designated charity. Or they can provide you with a check payable to charity.

It’s very important that you follow these rules. Avoid withdrawing funds from your IRA directly and then sending it to a charitable organization, as this would require you to pay income taxes on the distribution.

The Bottom Line

A QCD can be a key tax benefit for charitable retirees who are at least 70 1/2 years old. The QCD won’t be included in taxable income for the year. And it can satisfy your RMD, which can be large enough to trigger unintended tax consequences and limit you from enjoying other tax breaks. But QCDs can be complex and may not work for everyone. So, it’s important you discuss QCDs with a qualified tax adviser.

The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.